Exhibit 10.3
SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT ("Agreement") is made as of the ______ day of
December, 2002, by and among GREENFIELD COMMERCIAL CREDIT, L.L.C., a Michigan
limited liability company ("Lender"), Diversified Corporate Resources, Inc., a
Texas corporation, and Datatek Corporation, a Delaware corporation, Xxxxx X.
Xxxxxx and Xxxxxxx X. Xxxxxxxx (collectively "Creditor").
RECITALS
A. As of the date hereof, Borrower is indebted to Creditor on the Junior
Indebtedness (as defined below).
B. Borrower is now borrowing, or proposes from time to time to borrow,
from Lender and Creditor has requested Lender to loan to Borrower, up to Three
Million Five Hundred Thousand and 00/100 Dollars ($3,500,000.00), pursuant to a
Loan and Security Agreement between Borrower and Lender ("Loan Agreement"). All
amounts owing to Lender under the Loan Agreement, as amended from time to time
(including any amendment increasing the principal balance above $3,500,000.00),
shall be referred to herein as the "Senior Indebtedness." The Senior
Indebtedness is due on demand.
C. The Senior Indebtedness is secured by security interests, mortgages,
liens, pledges, assignments and encumbrances ("Security Interests") on all
assets of Borrower.
NOW THEREFORE, in consideration of the premises and for value received and
as an inducement to Lender to extend credit and lend money to Borrower, it is
jointly and severally agreed by the parties hereto as follows:
1. Any and all indebtedness of the Borrower to Creditor now existing or
hereafter created (the "Junior Indebtedness"), and the payment thereof by the
Borrower, shall be and is hereby postponed and subordinated to the prior payment
and satisfaction in full of the Senior Indebtedness. As used in this Agreement,
the term "indebtedness" shall mean any and all indebtedness, liabilities, and
obligations of every kind, nature and description, owed to Creditor by the
Borrower, whether direct or indirect, absolute or contingent, whether now due
and owing, or which may hereafter, from time to time, be or become due and owing
whether heretofore or hereafter created or arising, including all indebtedness
evidenced by any promissory note or notes now or hereafter executed and
delivered by the Borrower to such creditor and any and all renewals, extensions,
modifications, notations, replacements or refinancings thereof, and including,
without limitation, reasonable attorney fees, costs, and expenses incurred by
such creditor in connection with the enforcement of this Agreement and any
promissory note or notes referenced herein as well as any other obligations of
the Borrower.
2. The Senior Indebtedness shall be indefeasibly paid in full and
discharged before the Borrower may make or before Creditor may require any
payment as to the Junior Indebtedness; provided, however, that Lender agrees
that so long as no Demand or Default (as defined in the Loan Agreement) has
occurred, the Borrower may pay (but not prepay) to Creditor:
(a) each scheduled interest payment; and,
(b) each scheduled principal payment, if after taking account of any
simultaneous payment of interest pursuant to 2(a) above and such scheduled
principal payment, Borrower would have borrowing availability under the Loan
Agreement of not less than $1,000,000.00,
according to the terms of the Junior Indebtedness Documents (as defined below)
as set forth on Exhibit A attached hereto.
3. The Junior Indebtedness is now and shall at all times hereafter be
unsecured. Creditor agrees that so long as the Senior Indebtedness is
outstanding, Creditor shall have no right to receive casualty or business
interruption insurance proceeds or condemnation proceeds, nor shall it have any
right to participate in or consent to the settlement of such proceeds.
4. In the event Creditor receives payment from the Borrower in violation
of this Agreement, whether such payment is in cash or otherwise, Creditor shall
be liable and accountable to Lender for such payment, shall be deemed to have
received such payment for the use and benefit of Lender, shall not commingle the
such payment with any other funds and shall pay over and deliver such payment to
Lender immediately upon receipt, to be applied upon the indebtedness of the
Borrower to Lender if in cash, and if in form other than cash, then as the same
is converted into cash.
5. This subordination by Creditor of the Junior Indebtedness shall
survive and remain in full force and effect in the event of any administration
of the property or affairs of the Borrower arising from any assignment for the
benefit of creditors, bankruptcy, receivership, liquidation or other like
proceeding. In the event the property or affairs of the Borrower are so
administered, indebtedness of the Borrower to Lender shall include interest
accrued subsequent to the date of the commencement of such administration until
the Senior Indebtedness is indefeasibly paid in full.
6. This Agreement shall continue to be effective, or be reinstated, as
the case may be, if at any time any payment to Lender is rescinded or returned
by Lender upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of the Borrower, or upon or as a result of the appointment of a
receiver, intervenor or conservator of, or trustee or similar office for the
Borrower or any substantial part of its property, or otherwise, all as though
such payment(s) had not been made. Creditor agrees to remit to Lender any
payment(s) received by Creditor after said rescinded or returned payment is
originally made by Lender.
7. Creditor shall not, without Lender's prior consent, (i) take any
action to obtain a judgment against Borrower, (ii) commence or join with any
other creditor or creditors of the Borrower in commencing any bankruptcy,
reorganization, receivership or insolvency proceeding against the Borrower,
(iii) exercise any other rights or remedies it may have under the Junior
Indebtedness Documents (as defined below), the Uniform Commercial Code or any
other applicable law with respect to any of the Borrower's assets or (iv) take
or permit any action prejudicial to or inconsistent with Lender's priority
position over Creditor that is created by this Agreement.
8. In the event the Borrower defaults on its obligations to Lender and,
as a result, Lender undertakes to enforce its security interests and liens in
any of the Borrower's assets, Creditor agrees that Creditor will not hinder,
delay or otherwise prevent Lender from taking any and all action which Lender
deems necessary to enforce its security interests and liens in any of the
Borrower's assets and to realize thereon.
9. In the event that the Borrower shall make payment of the Junior
Indebtedness in violation of this Agreement, whether such payment be in cash or
otherwise, then and in such event Lender shall be entitled to all of its
remedies for default set forth in the Loan Agreement including the right, at its
option and without notice, to declare all indebtedness of the Borrower to Lender
to be immediately due and payable notwithstanding the terms and conditions of
any note or other evidence thereof to the contrary.
10. Creditor and the Borrower represent to Lender that the Junior
Indebtedness is evidenced by the promissory notes listed on Exhibit A attached
hereto (the "Creditor Notes") without any
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counterclaim, defense or offset. Creditor and the Borrower further represent to
Lender that said Junior Indebtedness is not evidenced by any notes or negotiable
instruments, other than the Creditor Notes. To the extent any Junior
Indebtedness subordinated by this Agreement is hereafter evidenced by a note or
negotiable instrument (also a "Creditor Note"), Creditor agrees to promptly,
upon receipt, deliver a copy of same to Lender.
11. Creditor agrees to endorse all Creditor Notes substantially as
follows:
"The indebtedness hereby evidenced has been subordinated in favor of
Greenfield Commercial Credit, L.L.C. ("Lender") by Subordination
Agreement dated December ______, 2002, to which reference is hereby
made, to secure all indebtedness now or hereafter owing by Diversified
Corporate Resources, Inc., a Texas corporation, to the Lender."
12. Creditor represents, warrants and covenants to Lender that:
(a) It has not relied and will not rely on any representations or
information of any nature made by or received from Lender relating to the
Borrower in deciding to execute this Agreement;
(b) As of the date hereof, the total amount of the Junior
Indebtedness is $_________;
(c) A true and correct description of each document evidencing the
Junior Indebtedness, including the Creditor Note(s), is listed on Exhibit A
hereto, a true and accurate copy of each such document, including any amendments
thereto, is attached to Exhibit A, and, as of the date hereof, no documents or
agreement evidencing or otherwise relating to any Junior Indebtedness (the
"Junior Indebtedness Documents") exist except as set forth on Exhibit A;
(d) The Junior Indebtedness is unsecured;
(e) Creditor is the lawful owner of the Junior Indebtedness free and
clear of all liens and encumbrances, and it has not subordinated, encumbered,
assigned or transferred, and agrees that it will not subordinate, encumber,
assign or transfer at any time while this Agreement remains in effect, any
right, claim or interest of any kind in or to the Junior Indebtedness. Any
subordination, assignment or transfer in violation of this subparagraph
12(d)shall be null and void; and
(f) Creditor has received all consents and approvals required in
order for it to execute and deliver this Agreement.
13. Lender may at any time or times, in its discretion, (i) renew, extend
or otherwise modify the rate of interest on, the time and/or terms of payment
of, and/or any other of the terms and provisions relative to the Senior
Indebtedness or any of the other provisions of the Loan Agreement, (ii) lend
additional monies, extend additional credit and make other financial
accommodations to or for the account of the Borrower, (iii) waive or release any
collateral or guaranties which may be held as security for all or any part of
the Senior Indebtedness, and/or (iv) renew, extend, modify, amend, supplement
and/or restate any and all of Lender's agreements with the Borrower, including
the Loan Agreement, in any manner, in each case, without necessity of consent
from Creditor and without impairing or affecting this Agreement or any of
Lender's rights hereunder. Creditor shall provide Lender with copies of any
modifications or amendments to the Junior Indebtedness Documents promptly upon
the execution thereof.
14. Creditor hereby waives any rights it has or may have in the future to
require Lender to marshal its collateral, and agrees that Lender may, in
addition to Lender's other rights hereunder, proceed against its collateral in
any order that Lender deems appropriate in the exercise of its absolute
discretion.
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Creditor also waives any right to be subrogated to the Senior Indebtedness
unless and until the Senior Indebtedness is indefeasibly paid in full.
15. Creditor agrees that it will not at any time directly or indirectly
contest the validity, perfection, priority or enforceability of any lien,
security interest, encumbrance or claim granted to Lender in or on the assets of
the Borrower, and hereby agrees not to hinder Lender or take a position adverse
to Lender in the defense of any action contesting the validity, perfection,
priority or enforceability of any such liens, security interests, encumbrances
or claims. Creditor further agrees that the provisions of this Agreement shall
remain in full force and effect notwithstanding a successful challenge to the
validity, perfection, priority or enforceability of all or any of the Senior
Indebtedness or the liens and security interests securing the Senior
Indebtedness.
16. This Agreement and the subordinations, agreements and priorities set
forth herein shall remain in full force and effect and Lender may make
extensions of credit to the Borrower in reliance upon this Agreement, until the
Senior Indebtedness has been indefeasibly paid in full, regardless of whether
any party hereto in the future seeks to rescind, revoke, amend, terminate or
reform, by litigation or otherwise, any part or all of this Agreement or any of
such party's respective agreements with the Borrower; and, Lender may hereafter
continue to grant to the Borrower renewals or extensions of time, and may
otherwise proceed in its sole discretion in the enforcement of the Senior
Indebtedness until all of said sums shall have been indefeasibly paid in full,
without in any manner impairing, lessening, or invalidating the force and effect
of this Agreement.
17. This Agreement shall be binding upon the parties hereto and their
respective heirs, executors, administrators, successors and assigns.
18. No delay, forbearance, or omission by Lender in the exercise of any
right or power accruing to it upon any default in the performance hereof by the
other parties hereto, shall impair any such right or power or shall be construed
to be a waiver of any such default or acquiescence therein. This Agreement may
be modified, and any of Lender's rights hereunder waived, only by an Agreement
in writing signed by Lender.
19. Upon the request of Lender, the Borrower and Creditor shall execute
and deliver such further documents and do such other acts as Lender may
reasonably request in order to effect fully the purpose of this Agreement.
20. All notices, demands, instructions, and other communications required
or permitted to be given to or made upon any party hereto shall be in writing at
the following addresses:
If to Lender: Greenfield Commercial Credit, L.L.C.
0000 Xxxx Xxxx Xxxx Xxxx, Xxxxx 000
Xxxx, Xxxxxxxx 00000
If to the Borrower: Diversified Corporate Resources, Inc.
00000 X. Xxxxxxx Xxx., Xxxxx 000
Xxxxxx, Xxxxx 00000
If to Creditor: Datatek Corporation
Xxxxx X. Xxxxxx
Xxxxxxx X. Xxxxxxxx
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21. This Agreement may be executed in any number of counterparts. Each of
which counterparts, when so executed and delivered, shall be deemed to be an
original and all of which counterparts, taken together, shall constitute but one
in the same agreement. This Agreement shall become effective upon the execution
of a counterpart hereof by each of the parties hereto. A facsimile signature
shall be effective as an original signature.
22. This Agreement is intended by the parties as a final expression of
their agreement and it is intended as a complete statement of the terms and
conditions of their agreement.
23. The validity of this Agreement, its construction, interpretation and
enforcement, and the rights of the parties hereto shall be determined under,
governed by, construed in accordance with internal laws of the State of Michigan
without regard to principles or conflicts of law.
LENDER: BORROWER:
GREENFIELD COMMERCIAL CREDIT, L.L.C., , DIVERSIFIED CORPORATE
RESOURCES, INC.,
a Michigan limited liability company a Texas corporation
By: GCC Management, Inc.
Its: Manager
By:__________________________________ By:________________________________
Xxxxxx X. Xxxx, Xx. J. Xxxxxxx Xxxxx
Its: President Its: Chairman and CEO
CREDITOR:
_____________________________________
Xxxxx X. Xxxxxx
_____________________________________
Xxxxxxx X. Xxxxxxxx
DATATEK CORPORATION
By:__________________
Xxxxx X. Xxxxxx, President
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EXHIBIT A
TO
SUBORDINATION AGREEMENT
BETWEEN
GREENFIELD COMMERCIAL CREDIT L.L.C.,
DIVERSIFIED CORPORATE RESOURCES, INC.
AND
DATATEK CORPORATION, XXXXX X. XXXXXX and XXXXXXX X. XXXXXXXX
JUNIOR INDEBTEDNESS DOCUMENTS
1. Purchase Agreement dated March 6, 2000 between Datatek Group Corporation, a
Texas corporation ("Datatek TX"), Borrower and Creditor.
2. First Amendment to Agreements dated ---, 2002, between Datatek TX, Borrower
and Creditor.
3.
4.
[TRUE AND ACCURATE COPIES OF EACH OF THE ABOVE DOCUMENTS,
INCLUDING ANY AMENDMENTS, ARE ATTACHED HERETO]
A-1
